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Inflation Is Always and Everywhere a Monetary Phenomenon: Richmond vs. Houston in 1864

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  • Richard C. K. Burdekin
  • Marc D. Weidenmier

Abstract

On April 1, 1864 the Confederate Currency Reform Act reduced the money supply in the Eastern Confederacy by one third. The delayed implementation of the reform west of the Mississippi provides a counterfactual view of what may have happened in the east had the reform not been enacted. This episode is a natural experiment illustrating the relative importance for prices of war news vs. the quantity of money in circulation. Our analysis of the major eastern and western gold markets, Richmond and Houston, strongly suggests that money matters more than war news in the post-reform period.

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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 91 (2001)
Issue (Month): 5 (December)
Pages: 1621-1630

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Handle: RePEc:aea:aecrev:v:91:y:2001:i:5:p:1621-1630

Note: DOI: 10.1257/aer.91.5.1621
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References

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  1. Pecquet, Gary M., 1987. "Money in the trans-Mississippi confederacy and the confederate currency reform act of 1864," Explorations in Economic History, Elsevier, vol. 24(2), pages 218-243, April.
  2. William O. Brown, Jr. & Richard C.K. Burdekin, . "Turning Points in the U.S. Civil War: A British Perspective," Claremont Colleges Working Papers 1999-29, Claremont Colleges.
  3. Burdekin Richard C. K. & Langdana Farrokh K., 1993. "War Finance in the Southern Confederacy, 1861-1865," Explorations in Economic History, Elsevier, vol. 30(3), pages 352-376, July.
  4. Calomiris, Charles W, 1994. "Price and Exchange Rate Determination during the Greenback Suspension," Oxford Economic Papers, Oxford University Press, vol. 46(2), pages 344, April.
  5. Osterwald-Lenum, Michael, 1992. "A Note with Quantiles of the Asymptotic Distribution of the Maximum Likelihood Cointegration Rank Test Statistics," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 461-72, August.
  6. Kristen L. Willard & Timothy W. Guinnane & Harvey S. Rosen, 1995. "Turning Points in the Civil War: Views from the Greenback Market," NBER Working Papers 5381, National Bureau of Economic Research, Inc.
  7. Marc D. Weidenmier, . "Turning Points during the U.S. Civil War: Views from the Grayback Market," Claremont Colleges Working Papers 1999-24, Claremont Colleges.
  8. McCandless, George T, Jr, 1996. "Money, Expectations, and U.S. Civil War," American Economic Review, American Economic Association, vol. 86(3), pages 661-71, June.
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Citations

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Cited by:
  1. Richard C.K. Burdekin & Marc D. Weidenmier, . "The Option Value of Confederate Currency and Inflation Control, 1861-1865," Claremont Colleges Working Papers 2000-29, Claremont Colleges.
  2. Marc D. Weidenmier & Richard C.K. Burdekin, 2002. "Suppressing Asset Price Inflation: The Confederate Experience, 1861-1865," NBER Working Papers 9230, National Bureau of Economic Research, Inc.
  3. Gary M. Pecquet & Clifford F. Thies, 2006. "Texas Treasury Warrants, 1861-1865: A Test Of The Tax-Backing Of Money," Eastern Economic Journal, Eastern Economic Association, vol. 32(2), pages 191-203, Spring.
  4. Weidenmier, Marc D., 2005. "Gunboats, reputation, and sovereign repayment: lessons from the Southern Confederacy," Journal of International Economics, Elsevier, vol. 66(2), pages 407-422, July.
  5. Burdekin, Richard C.K., 2008. "US pressure on China: Silver flows, deflation, and the 1934 Shanghai credit crunch," China Economic Review, Elsevier, vol. 19(2), pages 170-182, June.
  6. Tang, Chor Foon, 2008. "Is inflation always a monetary phenomenon in Malaysia?," MPRA Paper 19778, University Library of Munich, Germany.
  7. Richard C.K. Burdekin & Marc D. Weidenmier, . "Circulating Interest-Bearing Currency: An Arkansan Experiment, 1861-1863," Claremont Colleges Working Papers 2003-04, Claremont Colleges.
  8. Marc D. Weidenmier & Kim Oosterlinck, 2007. "Victory or Repudiation? The Probability of the Southern Confederacy Winning the Civil War," NBER Working Papers 13567, National Bureau of Economic Research, Inc.
  9. Hetherington, Bruce W. & Kower, Peter J., 2011. "Technological diffusion and the Union blockade," Explorations in Economic History, Elsevier, vol. 48(2), pages 310-324, April.
  10. Marc D. Weidenmier, . "Turning Points during the U.S. Civil War: Views from the Grayback Market," Claremont Colleges Working Papers 1999-24, Claremont Colleges.
  11. Richard C.K.Burdekin & Marc D.Weidenmier, 2002. "Interest-Bearing Currency and Legal Restrictions Theory:Lessons from the Southern Confederacy," Cato Journal, Cato Journal, Cato Institute, vol. 22(2), pages 199-209, Fall.
  12. Marc Weidenmier, 2004. "Gunboats, Reputation, and Sovereign Repayment: Lessons from the Southern Confederacy," NBER Working Papers 10960, National Bureau of Economic Research, Inc.

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